It’s time for the EU to negotiate seriously

The UK white paper on Brexit should be given serious consideration, writes Guntram Wolff (Bruegel). While it breaks a number of European red lines, it is also an attempt to resolve some issues. The question is whether the EU will be ready to negotiate seriously. Geostrategic considerations suggest that it is time for it to do so.

After the British cabinet agreed to a Brexit plan at its Chequers meeting, two of the loudest Brexit proponents – the secretary in charge of the Brexit negotiations, David Davis, and the foreign secretary, Boris Johnson – stepped down. Both said the Chequers agreement would not give the UK full sovereignty over lawmaking.

Johnson also gave an example as to why this mattered, with a story of female cyclists and juggernauts – although he apparently got the facts wrong, as it was the UK government that had wanted to prevent a regulation that he, as mayor of London, had been in favour of. The regulation increasing the safety of cyclists eventually passed thanks to the European Parliament. Leaving this peculiar “mistake” aside, the former foreign secretary actually has a point: the deal that the UK proposes in its white paper would de facto leave the UK as a rules-taker in goods. Its sovereignty in setting regulation for goods would be gone.

Theresa May nevertheless proposed this deal. Why? The reasoning is simple. The EU’s preferred option — a standard, off-the-shelf trade deal for Great Britain with Northern Ireland in the customs union and parts of the single market — would break up the UK. Indeed, it would mean that the UK would have to install customs controls in the Irish Sea. Northern Ireland would economically have ended up being part of the European Union, and Westminster would have lost power over this part of the island.

The other option that the EU suggests would be a combination of EEA membership with continued membership of the customs union. No country outside the EU is in such an arrangement. De facto, it would mean that the UK would not leave the deep economic integration it currently enjoys. But that would imply it becoming a full rules-taker – without having any say on legislation. As Theresa May put it: “It would not be Brexit at all.”

So none of the options on the table would have been acceptable and attractive to the UK. The now proposed solution, however, is not a done deal yet. On the contrary, the proposed Brexit plan would mean full regulatory alignment of UK legislation with the EU legislation in goods. In practice, the UK would thus become a rules-taker. It would also commit to accept jurisprudence of the European Court of Justice in UK courts and would propose a new court for cases relevant to both sides. The European Court with only EU judges could not be the court of arbitration without any UK judge present. The UK also proposes a political dialogue for UK ministers with EU ministers. However, the UK would not participate in the free movement of labour, and nor would it participate in the services sector movement. After all, the sector makes up more than 70% of the UK economy and is also the sector in which the UK has a strong competitive edge in its exports.

Whether such a deal would command a majority in the House of Commons is unclear. In fact, there may be many MPs that, like Boris Johnson and David Davis, think that this option makes the UK too much of a rules-taker.

But there is also the EU side. While the prime minister tries to strike a new and fair balance of rights and obligations, the proposal would still break a number of the EU’s red lines. In particular, the EU is sceptical that it should grant full market access to goods without complete access and compliance in services and total labour mobility. Moreover, the EU has doubts on the customs side of the arrangement. It also has serious concerns about whether agreement can be enforced, arbitration and dispute settlement frameworks, and implications for third countries such as the EEA. The EU is unlikely to start crossing some of its red lines.

In any case, it is now clear that the services market, including financial services, will be seriously fragmented after Brexit. For goods, there is still some hope for a deal, but it may be less than what the UK proposes. The prospect of no deal whatsoever and a period of several years with severe limits on trade remains high. Donald Trump’s interview with the Sun newspaper raised the stakes.

A lot of the paper is unacceptable and needs to change, but it looks like a good moment for the EU to strike a geo-politically motivated bargain with the UK, or risk losing the UK as a strategic partner. Whether Europe will be confident enough to do so remains to be seen.

This post represents the views of the author and not those of the Brexit blog, nor the LSE. It first appeared at Bruegel.

Guntram Wolff is the Director of Bruegel. His research focuses on the European economy and governance, on fiscal and monetary policy and global finance.

I think the governments of the EU27 must be aware that they have only three options:

1. Reject the Chequers deal. This will almost certainly lead to a Brexiteer as Prime Minister and hard Brexit. The EU might dream of a new referendum or the UK government giving up many of its red lines, but there doesn’t seem to be any viable political route to this.

2. Accept Chequers, with cosmetic modifications and various mitigations for its worse consequences, but no major concessions from the UK. If they do this fairly soon, there is at least a good chance Theresa May will be able to get it through Parliament.

3. Kick the can down the road. Unfortunately there isn’t a lot of road left. I think the Tory Brexiteers are unlikely to consent to the UK government asking for the exit date to be postponed (echos of Hotel California), at least not if the idea is to outwait the UK.

So I think rationally the EU27 should, with gritted teeth, go for option 2. Whether the rational course will prevail is anyone’s guess but I think that at least in Germany there are some signs that the red lines are softening. (For example Horst Seehofer’s letter at the end of June or an editorial in the FAZ from the 9th of July.)

The EU can’t accept any version of Chequers as it is not within the scope of the agreed negotiation brief for Barnier. Even if the EU wanted to accept it, the earliest they could realistically sign off a new mandate would be the December summit. The Chequers white paper was simply published two years.

At this point the UK either caves in and accepts the NI backstop or some variation thereof or it crashes out next March. It is simply too late to do anything else.

I think it’s fair to say that both opinion columns want the EU to build on Chequers and make something of it. So I think there is at least movement in Germany to try and get a deal here. Of course if Christoph is right (I can’t comment on that) it’s game over, but I hope he is wrong.

The Süddeutsche and the FAZ are probably among the two most influential broadsheets (yes, they still exist) in Germany. The FAZ is perhaps most similar to what the Times was like before it become Murdochized and when Top People (or at least Top Tories) still read it, the Süddeutsche is more left-wing but IMHO not as left-wing as the Guardian.

At which point the ERG and Labour probably vote against the government, because the ERG wants to crash out anyway and Labour wants an election. And then I honestly have no idea what happens, but the default would be for the UK to crash out.

The UK took 2 years to settle its overture position.And it wants to quit…It granted an Irish backstop in december 17 and reneged. The UK has red lines, unmovable red lines.

It knew the EU red lines from the beiginning. It now wants to have EU abandonning all its red lines and allowing UK to keep its red lines.

The Brexiteers have no plan, They are quitting the UK gvt at an unprecedented speed. All they want is howling and not facing the consequences of their acts. None of them even proposed a practical solutions which respected all the red lines. There’s only one solution, it’s called WTO. Let them assume it.

The Chequers White Paper proposals do not conform to what is possible for the EU to accept. The UK’s red lines are based only on an interpretation of what the referendum vote meant. They are not immutable and changing them would only have political and economic consequences.

The EU’s red lines are, however, of a different nature. Membership of the single internal market is available to members of the EU and EEA/Efta only and mean acceptance of the jurisdiction of the ECJ, free movement of workers, services, and capital. If a single market in goods became available to a third country without any of the obligations, then there is no reason for the EU to exist. Therefore it cannot happen. Also, if the UK as a third country s given better access than Canada or South Korea, the EU is bound by treaties signed to give these (and other) countries the same deal.

There are more problems – being a single market for goods but not services does not make sense. Many goods depend on services for upkeep. It is really impossible to divorce these two “sectors”.

It is possible to be in the single market, but not a customs union – Norway is. This would unfortunately not solve the Irish border problem.

In reality, there is only two viable solutions – either UK in the EU or in EEA/Efta with a customs union. A no deal brexit is not sustainable and a simple Free Trade Agreement would take 7 to 10 years to agree and implement, considering that the UK would have to replicate in the UK all the competences and agencies we now share with the EU (Aviation, Medicine, Chemicals, Food, Agriculture, Copyright, IT, Defence etc) By the time we were up and running there would be no industries left to regulate unless we stayed in the EU during that period and even then the economic fallout would be catastrophic..

The reason the EU can’t bend its red lines is embedded in the definition of the EU. The UK red lines are superficially imposed and as such are non-essential. This is why the negotiation cannot be tit for tat or give and take, but only acceptance of what is possible.

“The UK’s red lines are based only on an interpretation of what the referendum vote meant. They are not immutable and changing them would only have political and economic consequences.” I think the immediate political consequence would be a Tory leadership election. This would probably come down to a two-way contest involving at least one Brexiteer, with the Conservative Party membership choosing between them. With the Conservative Party membership as it is and the alternative being portrayed as going soft on the EU, a Brexiteer would win.

Of course political forecasting is always uncertain and things may turn out otherwise, but I don’t see it. We have to remember that most of the Tory Brexiteering MPs are passionately against the EU and many of them have been so since the 1990s. They are not stupid and they are not going to be persuaded into voting to keep the UK in the single market or supporting a PM who does, even to avoid a general election.

Some kind of National Government formed of Labour and Tory Remainers would be mathematically viable but there seems to me to be hardly any appetite for this among MPs.

Thanks Alias for your input. I agree with your analysis. However, internal UK politics are not going to change the EU’s position. It is not a question of negotiating a path between two opposing opinions. It is a question of the UK fitting it’s ambitions into the EU rulebook.

I hate the golf club analogy, but in this case it is apt. The UK cannot expect the golf club to change it’s rules to accommodate the ambitions of a leaving member – the Golf Club exists to benefit it’s existing members. It welcomes outside players as long they are accommodated without hindering members.

A new hard brexit PM would cause a general election and the outcome would probably be a hung parliament with no chance for either main party to form a minority government. The UK is effectively ungovernable now, and it’s going to get worse.

IMO the arguments put in this article lack any credibility or feasibility. Exactly what form the so-called Chequers ‘Agreement’ currently lies in for certain we do not know. The U.K. Government must be one of the most fractured and fracturing in modern times. Theresa May is a gauche, spinning, weak Prime Minister seemingly as much dictated to by her Brexiteer extremist backbenchers as by her disloyal Cabinet and ex Cabinet members. How can anyone argue in these circumstances that it is up to the EU to now negotiate seriously? There is no coherent, cohesive, competent UK party to negotiate with or credible UK plan to negotiate on.

“The EU’s preferred option — a standard, off-the-shelf trade deal for Great Britain with Northern Ireland in the customs union and parts of the single market — would break up the UK. Indeed, it would mean that the UK would have to install customs controls in the Irish Sea. Northern Ireland would economically have ended up being part of the European Union, and Westminster would have lost power over this part of the island.”

1) Northern Ireland voted to Remain in the EU – is that fact irrelevant?
2) the Irish Sea, and the fact that Great Britain and Northern Ireland exist on two different islands, is an inescapable fact of geography. It is far easier to carry out checks at the few ports and airports carrying goods east -west than on the 310 mile north-south land border.
3) Northern Ireland is different – it is NOT as British as Finchley. It is effectively a bi-national British-Irish region. The Good Friday peace agreement de facto recognises that by giving people in NI the right to be – and be recognised as – either British or Irish citizens as they choose. Also NI is in the unique position that its position in the UK is dependent on its people choosing to be – or not to be.
4) It is not taking cognisance of the unique position of NI that risks ‘breaking up the UK’, but rather the reverse. It is REFUSING to recognise the unique position of NI that poses the greater long term threat to the UK. And much the same could be said in relation to Scotland.
5) The osition of NI in all this is distorted by the fact that the main party of one community, the DUP, is virtually in power in London, while the main party of the other community refuses to attend Westminster. This distorts the optics of NI when viewed from London – but it in no way changes the facts on the ground in NI.
6) what people in NI really mean by ‘no hard border’ is no change of any sort that would make the border significant again; what Leavers like Boris want the term to mean is no physical barriers and watch towers.

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